Can McDonald's new value menu revive slumping sales?

The sun sets behind a McDonald's in Ebensburg, Pa. last month. McDonald's has a new deal that the company hopes will be as popular as its Dollar Menu. Starting next year, the fast-food chain will launch the 'McPick 2' menu, which will let customers pick two of the following items for $2: a McDouble, a McChicken, small fries, and mozzarella sticks.

While many restaurants and food companies have been promoting more natural ingredients and fewer artificial preservatives and colors, McDonald's new deal represents a recognition that value is still paramount for many consumers.

In Nov. 2012, Donald Thompson, then-McDonald's CEO, told analysts that the tough economic conditions were the "new normal," and that McDonald's would need to continue emphasizing its low-cost menu items.

In fact, about one-quarter of McDonald's customer visits are motivated by value, Mike Andres, president of McDonald's USA, said in a Nov. 10 meeting, adding that some of the chain's customers have been "tempted away from McDonald's by a more consistent value offering by our competition."

That competition includes rival Wendy's, which in October, launched its own four for $4 meal, an offer that includes a Jr. Bacon Cheeseburger, chicken nuggets, small fries and a small drink. KFC lures value-conscious customers with its $5 Fill Ups boxes, and Subway has long promoted its $5 Footlong sandwich and now, a Simple $6 Menu.

McDonald's once pioneered this value-driven menu promotion with its incredibly popular Dollar Menu, introduced more than a decade ago. In 2008, Dollar Menu items accounted for about 14 percent of total US sales, suggesting that low-cost items are important for the chain, especially in stagnant economic times.

Since phasing it out, the restaurant has tried to replace it with alternatives, including the “Extra Value Menu” in 2012 and the “Dollar Menu & More” the following year. Neither caught on.

"As we moved away from the Dollar Menu, we didn't replace it with offers of an equivalent form of value. And customers have voted with their feet," CEO Steve Easterbrook said in July.

Since then, the fast food chain has focused on driving traffic and sales to revive slumping revenue. In addition to its 2016 McPick2 launch, it has introduced all-day breakfast, as well as digital menu boards that recommend food based on the weather and the time of day.

With the launch of McPick2, as well as new menu items like Buttermilk crispy chicken, plans to add kale to its menu, and a return to beloved classics, such as the original Egg McMuffin – made with butter, not margarine – McDonald's is hoping to refresh its brand.

As Mr. Easterbrook told analysts in October, “While still in the early stages, we believe our turnaround plan is starting to generate the change needed to reposition McDonald’s as a modern, progressive burger company.”